In the past few decades marketers have begun experimenting with pricing strategies that have consumers decide the final price for a product or service. These pricing strategies are believed to engage consumers, boost sales, enhance brand loyalty, and contribute to a sellers’ overall competitive position. However, in recent years many firms, including Priceline.com, Panera Bread, and the Metropolitan Museum of Art in New York have abandoned their once famous use of participative pricing (i.e., Pay What You Want) and reverted back to fixed prices. In this research, we critically examine participative pricing to understand how and under what conditions it might enhance purchases.
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Consumer Behavior; Marketing Strategy; Pricing; Retail Marketing
Wand, Cindy Xin, Joshua T. Beck, and Hong Yuan (2021), “The Control–Effort Trade-Off in Participative Pricing: How Easing Pricing Decisions Enhances Purchase Outcomes,” Journal of Marketing, doi: 10.1177/0022242921990351.
Participative pricing strategies may influence consumer purchase decisions; this research proposes specifically that firms’ delegation of pricing decisions to consumers can create a control–effort trade-off. Consumers favor greater pricing control but are deterred by the effort involved in deciding what to pay. Strategies such as pay what you want (PWYW) in turn might reduce purchase intentions due to the effort involved. In contrast, strategies that increase feelings of control but not perceived effort, such as pick your price (PYP) options that let consumers choose from a limited set of prices, could enhance pricing outcomes. A field study and four laboratory experiments confirm these propositions. The findings demonstrate the mixed effects of participative pricing, identify mediating mechanisms that explain these effects, and specify common moderating conditions that shape the outcomes of participative pricing. These results have notable implications for pricing theory and practice.
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